Small business owners are getting hounded by tax collectors from thousands of miles away after the Supreme Court approved online sales taxes for out-of-state purchases.
Conflicting tax codes never intended for uniformity across state lines are overwhelming small online retailers who are now forced to pay taxes to hundreds – and perhaps even thousands – of out-of-state municipalities.
This is a direct result of Wayfair v. South Dakota in which the Supreme Court ruled last June that states could collect sales taxes from online businesses far outside their state lines.
“It almost seems like I have another full time job dumped on me with this sales tax thing,” Chris Heitman, owner of Pegasus Auto Racing Supplies, told Reason.com. “It’s burning me out.”
For one thing, Heitman is having to learn the different rates of different states, and even when he does that, he has to worry about particular cities having their own taxes.
So, for example, if he has two customers out of thousands in one small town, he’s expected to know whether if the town charges sales tax and if so, at what rate.
Because the Supreme Court ruling is so new – and also so vague – there hasn’t been a lot of tax software developed yet to help small business owners navigate this maze of tax codes.
And the ruling may ultimately help large online retailers who can afford a team of employees to focus entirely on satisfying state and local taxes.
In response, Rep. Jim Sensenbrenner (R-Wis.) may reintroduce a bill entitled the Online Sales Simplicity and Small Business Relief Act that would exempt small retailers with under $10 million in sales from paying out-of-state sales tax.
“Small business owners, in particular, have shared fears that they will be unable to bear the new compliance burdens and may have to shutter their businesses,” Sensenbrenner said. “I’ve heard from online sellers in Wisconsin and across the country who are concerned with the complexity of the post-Wayfair tax regime.”
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